Fundamental Precious Metals (2011-08-24)

<h3>Gold rallies on Japan’s credit rating downgrade</h3>

By IBT Staff Reporter On 08/24/11 AT 5:03 AM

Gold rallies on Japan’s credit rating downgrade

Gold advanced today after the opening in the Asian session, to recover some of the huge losses incurred yesterday, where demand for the shiny metal increased after Moody's rating agency downgraded Japan's credit rating by one step to become Aa3. In addition, the metal was also affected by the worsening debt crisis, after the German Chancellor, Angela Merkel, rejected the labor minister's proposal, which required countries to put gold as security for bailouts, which reflects the widening gap and the rising conflict among euro area nations.

Gold surged today after the opening at $1827.90 per ounce, to record the high of $1853.79 and the low of $1826.50, and is currently trading around $1849.11 per ounce.

As we expected, the shiny metal returns to continue the upside journey, however is currently recovering the huge losses recorded in the past session, where after the slight wave of optimism seen yesterday in addition to the profit taking by investors, gold advanced again amid the downbeat growth outlook along with the deepening debt crisis in Europe and the Japanese credit rating cut by Moody's, which drove investors to hold more gold as a safe haven, in attempts to protect their wealth against the coming economic events in light of the high level of uncertainty.

Moreover, Fed's Chairman, Ben Bernanke is expected to announce a third round of quantitative easing on Friday, while central bankers worldwide will gather for an annual meeting, where the Chairman's announcement could reflect the Fed's movements to stimulus growth in the world's largest economy, after the downbeat growth outlook in the states in addition to the huge deficit and the credit rating downgrade along with the slowing pace of recovery, where all these facts together supported the rapid incline seen on the shiny metal to set historic records back in July and continue to force upside pressures on the metal.

Shanghai Gold Exchange is to increase the margins on gold futures for the second consecutive time in the same month in order to control the rapid incline in the yellow metal. The entity will raise margins to 12% from the previous of 11% starting from the settlement today, in attempts to reduce risks and stabilize the markets along with protecting investors' interests, the bourse said in a statement posted on the website.

Silver also advanced today after the opening in the Asian session, recovering some of the huge losses recorded in the past session, where the slight wave of optimism led investors to take profits on precious metals, and then invest in stock markets, which seemed to be more profitable yesterday, after all the main indexes witnessed gains during the European session.

The metal opened the session today at $41.86 per ounce and fluctuated heavily to set the highest at $42.40 and the lowest at $41.25, while the metal is currently hovering around $41.97 an ounce.

Platinum declined today after the opening in the Asian session at $1863.60 an ounce, recording the high of $1881.60 and the low of $1859.25, and is currently hovering around $1862.8 per ounce.